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The Ready-Made Garment (RMG) industry, the cornerstone of our economy, is navigating a critical juncture as the nation grapples with challenges stemming from the transition following the fall of the previous regime. As the second-largest exporter of garments globally, the RMG sector has been instrumental in shaping the country’s economic trajectory and development.
However, with shifting dynamics in the global trade landscape and increasing competition, a pressing question arises: can we sustain our competitive edge and retain our position as the world’s second-largest exporter? Competing nations like India and Vietnam have made remarkable progress in strengthening their industries by addressing long-standing challenges, significantly enhancing their global competitiveness.
Adding to this uncertainty is the growing concern over whether Bangladesh still holds the title of the second-largest exporter. Discrepancies in the data disclosed by the Export Promotion Bureau (EPB) for FY23 and FY24 have revealed notable inconsistencies. Given these mismatches, it would not be surprising if Bangladesh has already lost its position in the global rankings.
The 2024 U.S. presidential election drew significant attention from Bangladesh’s apparel manufacturers, as the U.S. remains one of the top destinations for the country’s garment exports. With Trump’s victory and his administration’s historically aggressive stance on tariffs, the future holds both opportunities and challenges for Bangladesh.
A proposed 60% tariff in China creates an opening for U.S.-based companies to diversify their sourcing, positioning Bangladesh as a viable alternative. However, Trump’s emphasis on reshoring manufacturing jobs domestically may accelerate nearshoring, where production shifts closer to U.S. markets.
According to a McKinsey study, trade barriers have surged fivefold since 2015, with nearly 3,000 restrictions introduced in 2023. These barriers are driving brands to source from politically aligned nations, while rising costs further support the trend of nearshoring. The share of foreign direct investment in apparel manufacturing directed toward nearshoring regions has risen by 20 percentage points for the U.S. and 8 percentage points for the EU over the past five years. This shift threatens economies reliant on manufacturing exports, including Bangladesh, as their market share could decline.[1]
Figure 1 Apparel and textile manufacturing foreign direct investments % of total
In the short term, the Trump administration’s policies may appear advantageous for Bangladesh. However, in the long term, these same policies pose significant risks to the sustainability of the country’s apparel sector.
The textile and garment sector contributes significantly to global carbon emissions, with estimates ranging from 6 % to 8 % of the total, equating to approximately 1.7 billion tonnes of carbon emissions annually.[2]
Beyond emissions, the sector consumes 93 billion cubic meters of water annually, enough to meet the needs of five million people. Additionally, 87% of the fiber input used in apparel production ends up being incinerated or disposed of in landfills.[3]
In alignment with these dynamics, the European Union (EU) is actively addressing environmental concerns within the apparel industry. Their initiative aims to curtail textile waste, extend the lifecycle of products, and promote textile recycling. These efforts are integral components of the regulations like Digital Product Passport (DPP) within the EU Green Deal framework and the Eco-design for Sustainable Products Regulation (ESPR) among others.
Figure 2: Summarization of EU Eco-Design for Sustainable Products Regulation
Amidst these environmental challenges, the EU as the largest buyer of Bangladesh’s apparel, recorded a 3.1% year-on-year growth in the current fiscal year, reaching USD 1.68 billion in August 2024.[4]To retain the top position in the EU apparel market, Bangladesh needs to align its RMG value chain with the sustainability requirements outlined in the EU Green Deal regulation.
Integrating a closed-loop system within the RMG value chain is imperative to adhere to the circular economy principles. Adopting such practices will allow to reduce the reliance on virgin materials and promote circularity by ensuring resources are continuously reused or recycled into new garments.
![Figure 3: Stages of Closed Loop Fashion Lifecycle[5]](https://lightcastlepartners.com/wp-content/uploads/2025/04/image-2.png)
Figure 3: Stages of Closed Loop Fashion Lifecycle[5]
This approach helps to diversify into various categories of sustainable fibers in the value chain. With this diversification in mind, the RMG manufacturers in Bangladesh are trying to incorporate man-made fibers (MMFs) into their production processes due to their superior recyclability as the global recycled fabric market share of polyester (one category of MMF) is 14 % compared to cotton with 1%.[6]
![Figure 4: Trend of percentage of fiber mix for top apparel exporting nation (2022)[7]](https://lightcastlepartners.com/wp-content/uploads/2025/04/image-1.png)
Figure 4: Trend of percentage of fiber mix for top apparel exporting nation (2022)[7]
While Bangladesh has made efforts to incorporate MMF into its garment production, it lags behind peer nations like India and Vietnam, which have advanced by 30% to 56% in their MMF integration compared to Bangladesh’s 28% as shown in the figure above.
However, to facilitate their production mix, the RMG manufacturers in Bangladesh are trying to move up the value chain, expanding their product lines to enhance better price negotiation in the global apparel market.
Bangladesh is heavily dependent on fossil fuels, comprising 98% of its energy mix, with the RMG sector being a significant energy consumer (Ember’s Global Electricity Review 2023).
The breakdown of energy consumption on a primary energy basis reveals that the manufacturing sector, including the RMG sector, accounts for the dominant portion of energy usage. Additionally, energy intensiveness is not evenly distributed across the entire apparel production process. For instance, the fabric production process consumes approximately 27,634 kWh of electricity, while garment production uses around 8,630 kWh. Additionally, the energy required to produce a single t-shirt is estimated to be around 10 MJ.[8]
To address these energy challenges, solar energy presents a viable solution for Bangladesh. As the most easy-to-implement renewable energy technology, solar power has gained significant traction, supported by both private organizations and growing government initiatives. This shift to solar energy could help reduce costs and mitigate the sector’s reliance on fossil fuels.
Bangladesh, scheduled to graduate from Least Developed Country status in 2026, will face multifaceted challenges, particularly in the RMG sector. The sector may face threat if the country does not meet stringent Generalized Scheme of Preferences Plus (GSP+) conditions, including labor rights reforms, to maintain these benefits thereafter, amid challenges posed by new EU policies and potential loss of competitiveness.
![Table 1: Matrix of Impact Factors Related to Bangladesh's LDC Graduation Posing Potential Threats to Market Access[9]](https://lightcastlepartners.com/wp-content/uploads/2025/04/image-3.png)
Table 1: Matrix of Impact Factors Related to Bangladesh’s LDC Graduation Posing Potential Threats to Market Access[9]
LDC graduation does not signify the end of trade preferences for Bangladesh, but rather presents opportunities for proactive engagements with trade partners to secure extended preferences, particularly with countries like India, China, and Japan. However, Bangladesh is lagging in bilateral trade negotiations, its main global competitor, Vietnam, has successfully secured a Free Trade Agreement (FTA) with the EU. This agreement will progressively provide Vietnam with zero-duty access to over 50 % of the global market by 2027, putting Bangladesh at a competitive disadvantage in key markets.[10]
To remain a leader in the global RMG market, Bangladesh must focus on mitigating emerging challenges while investing in innovation, sustainability, and workforce development. A proactive approach in addressing these areas will be essential for ensuring that our RMG industry continues to thrive and sustain its critical role in the nation’s economic progress.
Sadia Karim and Sakina Binte Belayet, Business Analysts at LightCastle Partners, have co-authored the write-up. For further clarification, please contact at: [email protected]
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